02/23/2018

Understanding the Basics about Medicare

Even if you are still working, once you turn 65, you have to navigate your way through an entirely new and complex health care system. While there’s no HR department, there are resources.

It starts the day you turn 65, and it’s a bit of a challenge. Seniors need to get up to speed fast on the many requirements of Medicare. A Kiplinger post, “FAQs About Medicare,” warns that mistakes can be extremely costly and difficult to fix. You’ll want to study up on this in advance.

For starters, if you signed up for Social Security before age 65, you’ll automatically be enrolled in Medicare parts A and B and receive your card three months before your 65th birthday. Part A covers hospitalization and is generally premium-free. Part B covers outpatient care, such as doctors’ visits, x-rays and tests.

Here are more Medicare basics:

Sign-up for others. Everyone who is not part of the group above, must take action to enroll or face a lifetime late-enrollment penalty (unless you’re still working and have employer coverage). Go to www.socialsecurity.gov to sign up anytime from three months before, until three months after you turn 65, your “initial enrollment period”. This is true, even if you’re waiting to file for Social Security benefits.

If you (or your spouse if you’re covered by your spouse’s insurance) are still working for a company with 20 or more employees, the employer’s insurance is your primary coverage. Medicare is secondary and can fill any gaps in coverage. You don’t have to sign up for Medicare at 65, and you won’t have a late-enrollment penalty, provided that you sign up within eight months of leaving your job and losing work-based coverage (or losing coverage under your spouse’s insurance).

If you work for a large employer and like the coverage, you can delay signing up for Part B. However, the rules are different if you work for a company with fewer than 20 employees: Medicare generally becomes your primary coverage at age 65, and you must sign up for Part A and Part B while you’re still working. You can’t delay signing up for Part A, if you’re already receiving Social Security benefits and were automatically enrolled in Medicare, despite the fact you’re still working.

Health savings account. You can still contribute to a health savings account after you turn 65, provided you haven’t enrolled in Medicare. If you’re able to delay signing up for Medicare Parts A and B, you can continue contributing to an HSA. Before you do, see about the HSA’s tax breaks, any employer contributions and other benefits that would be more valuable than the premium-free Part A coverage.

Retiree health insurance. At age 65, unless you (or your spouse) are still working and have current employer coverage, you should sign up for both Medicare Part A and Part B. Retiree coverage can fill gaps in Medicare (which would otherwise require Medigap and Part D policies or a Medicare Advantage plan), but it’s secondary to Medicare after age 65. It may also not kick in at all, if you don’t sign up for Medicare. Federal retiree coverage is an exception. It remains your primary coverage if you don’t sign up for Medicare, but you’ll pay a penalty if you decide to sign up for Part B down the road.

The late-enrollment penalty is 10% of the Part B premium for every year you should have had coverage. The penalty applies as long as you receive Medicare benefits.

Medigap. You may need Medigap insurance to pay deductibles and co-payments. Most folks buy a Medicare supplement (Medigap) policy to pay those costs, plus Part D prescription-drug coverage since Medicare generally doesn’t cover drugs. Another option is to sign up for a private Medicare Advantage plan, which provides both medical and drug coverage. These policies are sold by private insurers and come in ten standardized versions. You get to go to any doctor or facility that is covered by Medicare. Private insurers sell part D prescription-drug plans. Medicare Advantage plans combine medical and drug coverage and may also provide coverage that isn’t available through Medicare, like dental and vision care.

Expensive drugs with high out of pocket costs, even with Part D coverage. Start by asking your physician if there is a generic version that costs less, or if you can use a preferred pharmacy. Then start shopping for a new plan during open enrollment in the fall.